Responding to Crisis:Planning and Execution as Competitive Advantage

16 August, 2011

Agenda

• Introductions• Marketplace Study Overview• Market Insights• Implications• Solution Set• Discussion

MARKETPLACE STUDY OVERVIEWResponding to Crisis: Planning and Execution as Competitive Advantage

Original Study Purpose

1. Determine perceived impact of debt limit debate on general business sentiment

2. Ascertain forward looking expectations of:1. Revenue trends2. Hiring plans3. Fixed asset investment4. Continuous improvement projects

Something Interesting Happened

• S&P downgrade• Stock market crash• Market recovery• A large amount of bad economic news all at

once

A Lot of Data Floating About

Bad News

• Housing starts down• Consumer sentiment weak• Employment gains have

been far too slow • Import costs up• S&P Downgrade• Fears of a double dip

Good News

• Shift to multi-family units • Consumer spending up• Weaker dollar helps export

&domestic consumption• Energy costs down• Lower interest rates• Industrial production spiked

Two Narratives Being Told

• “My business looks fairly solid”– Fact driven personal narrative– Order books holding strong into 4th quarter– Cautious optimism about the future

• “The economy is faltering”– Opinion driven global narrative– Fear about “them” making a mess of things– Waiting for the shoe to fall

MARKET INSIGHTSResponding to Crisis: Planning and Execution as Competitive Advantage

Survey Set

• Reached out to thousands of C-level decision makers

• Responses from 115• Broken into two distinct groups:– Pre August 8th – August 9th and later

Manufac

turing

Business

servi

ces

Logis

tics

Finan

ce/ban

king

Distrib

ution

Consumer

servic

esOther

Constructi

on

Component/p

roduct

assem

blyReta

il

Restau

rant/h

ospita

lity0%

10%

20%

30%

40%

50%

60%

70%

38%

25%

15%

10%

4% 4% 4%0% 0% 0% 0%

62%

4%2% 3%

9%

0%

6%3%

1%

10%

0%

What is your firm's primary role?

Pre Aug 8Aug 9 & later

< $5 m

illion

$5 milli

on - $24 m

illion

$25 milli

on - $99 m

illion

$100 milli

on - $249 m

illion

$250 milli

on - $500 m

illion

> $500 m

illion

0%

5%

10%

15%

20%

25%

30%

35%

40%

23% 23%

33%

10%

5% 5%3%

31%

37%

20%

5%3%

What are your company's anticipated 2011 revenues?

Pre Aug 8Aug 9 & later

Very much hurt Hurt a bit No impact Helped a bit Very much helped0%

10%

20%

30%

40%

50%

60%

33%

52%

5% 5% 5%

39%

47%

2%

10%

2%

Do you believe that the method and language coming from the recent debt ceiling debate has helped or hurt the U.S. economy?

Pre Aug 8Aug 9 & later

Decline >10% Decline 1% - 10% Flat Grow 1% - 10% Grow >10%0%

10%

20%

30%

40%

50%

60%

0%

4%

14%

52%

28%

3%

19%

24%

35%

18%

Compared to the second half of 2010, how do you anticipate your firm's revenue will perform in the second half of 2011?

Pre Aug 8Aug 9 & later

Decline >10% Decline 1% - 10% Flat Grow 1% - 10% Grow >10%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0% 0%

38%

47%

14%

7%

10%

40%

37%

5%

Compared to the second half of 2010, what are your firms' plans for hir-ing in the second half of 2011?

Pre Aug 8Aug 9 & later

Decline >10% Decline 1% - 10% Flat Grow 1% - 10% Grow >10%0%

5%

10%

15%

20%

25%

30%

35%

40%

0%

14%

28%

33%

23%

5%

10%

36%

34%

15%

Compared to the second half of 2010, what are your firms' plans for fixed asset investment in the second half of 2011?

Pre Aug 8Aug 9 & later

Decline >10% Decline 1% - 10% Flat Grow 1% - 10% Grow >10%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0%

4%

28%

47%

19%

2%4%

33%

48%

13%

Compared to the second half of 2010, what are your firms' plans for investment in cost reduction and/or continuous improvement pro-

grams during the second half of 2011?

Pre Aug 8Aug 9 & later

Direct Comparison

Pre S&P Downgrade

• Revenues:– 78% expect revenue growth– 4% expect revenue decline

• Hiring:– 51% expect hiring growth– 0% expect hiring decline

• Fixed Asset Investment:– 56% expect CapEx growth– 14% expect CapEx decline

Post S&P Downgrade

• Revenues:– 52% expect revenue growth– 22% expect revenue decline

• Hiring:– 42% expect hiring growth– 17% expect hiring decline

• Fixed Asset Investment:– 49% expect CapEx growth– 15% expect CapEx decline

Direct Comparison (cont’)

Pre S&P Downgrade

• Continuous Improvement– 66% expect increased CI– 4% expect decreased CI

• Worries

Post S&P Downgrade

• Continuous Improvement– 61% expect increased CI– 6% expect decreased CI

• Worries

Reven

ue

Another rec

ession or e

conomic d

ownturn

Raw m

ateria

l costs

Labor c

osts

Energ

y costs

New pro

duct dev

elopmen

t

Transp

ortation co

sts

Availa

bility o

f cap

ital

0.00

1.00

2.00

3.00

4.00

5.00

6.00 5.20

4.60

3.803.30 3.20 3.00 2.70 2.60

5.09 5.034.41

3.33

2.41 2.412.76 2.55

Please rank the following concerns as they relate to your business. (1 = Least, 8 = Most)

IMPLICATIONSResponding to Crisis: Planning and Execution as Competitive Advantage

Significant Ambiguity• Will the economy fall into recession?• What happens to commodities?• Will the consumer stop spending?• Are industrial production numbers a mirage?• What about automotive?• Where will construction go?• Will we have jobs?• What about the debt reduction plan?• What happens if Europe collapses?• Will a slowing China ruin everything?• Will energy prices skyrocket?• What happens if stagflation returns?

Traditional Business Planning Insufficient

• Chart a single course of action• Heavy on outcomes, weak on tactics for

implementation• Three to five year goals• Assume too little• Unresponsive to changes in market realities

SOLUTION: ACTION BASED PLANNING

Responding to Crisis: Planning and Execution as Competitive Advantage

Expectation: Managed Ambiguity

• Multiple higher-likelihood scenarios• Timeline and action driven• Heavy focus on next 90 days• Well defined future state• Clearly outlined assumptions • Short term focus on revenue, internal

obstacles

A Well Managed Business

Goals

Objectives ObjectivesObjectives

Action/ Behavior

Action/ Behavior

Action/ Behavior

Action/ Behavior

Action/ Behavior

Direction Feedback

Elements, In Triplicate Please

• Clearly defined future state• Small number of achievable objectives• Understanding of external threats• Documented list of assumptions for success• Internal focus on why it won’t work• 90 day action plan

Plan the Work, then Work the Plan

• Review weekly– Sales activity– General assumptions– KPI

• Review monthly– Revenue– Specific objectives

Harness Your Team

• Small group of leaders who can get things done

• Define a game plan, playbook for each scenario

• Fewer meetings, more joint work• In God we trust, all others bring data

In Review

• C-suite sentiment has softened somewhat• Ambiguity has increased dramatically• Traditional planning approaches are too rigid,

timeframe too long• Action focused planning is a better option• Listen to the business• Nothing matters more than the next 90 days

DISCUSSIONResponding to Crisis: Planning and Execution as Competitive Advantage

NEED SUPPORT?CONTACT US:PHONE: 616.635.2920EMAIL: ANDREW@SIMPLICITYPARTNERS.COM

Responding to Crisis: Planning and Execution as Competitive Advantage